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Fine Art Asset Management

Art, Inflation, and the Soaring Wealth of Art Collectors

In recent years, there has been a significant shift in the way art is valued and traded, making it a relatively safe store of value in turbulent financial times. It’s surprising for many that in moments where inflation affects every area of the global economy, the art market keeps being a high-demand area where art collectors become wealthier day by day. So, why have art and art collectors not been dampened by high inflation? Keep reading to discover.

Art and inflation over time

Art has historically proven to be a good investment, even so, that it outperformed gold during extreme inflation in the 1970s to 1980s. Then again, after the largest recession in 2020, the global art market recovered strongly with aggregate sales reaching $65.1 billion. This only shows that unlike stocks, bonds, and other traditional asset classes that can be affected by market fluctuations, art retains its value over time. Perhaps this is due to the fact that the value of the art market is determined based on aggregate sales of fine art by dealers and auction houses. Not to mention that value in many art pieces is largely based on sentiment and not so much on the intrinsic value of the asset such as real estate and cryptocurrency.

Art collectors and their soaring wealth

Art collectors who have invested in high-quality pieces have seen significant returns on their investments in recent years. An important factor contributing to the increasing wealth of art collectors is the growing interest in art as an asset class. As more people have become interested in investing in art, the market has become more competitive, driving up prices even further. This comes down to the fact that higher art prices and higher sales volume signify a stronger art market. Another element helping art collectors become wealthier is the rise of art investment funds. These funds allow investors to pool their money together to buy high-quality art pieces, which are then held for a period of time before being sold for a profit. Take for example, Salvator Mundi by Leonardo da Vinci, which was sold for $450.5 million at a Christie’s auction in New York in 2016. This only demonstrates the incredible prices art collectors and patrons are willing to pay for pieces they believe will retain their value over time.

Investing in art

So far, the art market has not been dampened by high inflation. And even though the exact correlation between inflation and the art market is debatable, art prices have historically increased during periods of high inflation. In 2022 there were numerous contemporary art auction records broken, as well as auction houses that reported high sell-through rates at auction. This is so because art tends to hold its value as well as generate moderate returns, which is what makes it a good investment long term. There are many benefits to investing in art and if purchased wisely, there is little risk of losing your acquisition. Take into consideration also that art can act as an inflation and currency devaluation hedge in almost any environment, lending artwork to events, exhibitions, or conferences can bring an additional revenue, and not to mention favorable tax treatment often can be received.

The rise of inflation, the popularity of art investment funds, and the growing interest in art as an asset class are all contributing factors that are making art collectors become wealthier than ever before. It’s fair to note that while the art market has the potential to be volatile, those who invest wisely in high-quality pieces can see significant returns on their investments.

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